Thursday, May 29, 2008

Warner-Lieberman Climate Change Bill - a step in the right direction

Over 10 years after the Kyoto Protocol was adopted, the United Stats is finally getting a clue about the best way to tackle air pollution - economics. Debate in the Senate is set to begin soon on the America's Climate Security Act of 2007 (also known as the Lieberman-Warner bill). This bill aims to limit greenhouse gases using a cap and trade system. Air pollution, carbon dioxide mostly, would no longer be free for companies and people to emit. Polluters would have to pay to pollute but those who reduce pollution could sell their rights to pollute to make money. That limits the amount of pollution (the cap) and gives a financial incentive to reduce pollution (the trade rights to pollute for cash).

This was the idea that was implemented in Europe as suggested by Kyoto but it didn't work out so well. It is still being tweaked. The problems with cap and trade in Europe? - the caps were set too high and the credits to be traded were given away for free. The Lieberman-Warner bill looks make a similar blunder by only selling some of the credits but give away most. I hope for our sake we learn a little more from Europe's mistakes before we pass this bill. Most economists blogs I read think credits need to be sold too: Greg Mankiw on cap-and-trade and Robert Reich on cap-and-trade (They also both discuss the issue in relation to McCain and Obama's view on the subject.)

Either way, I am excited to see some real serious discussions about air pollution and global warming by the US government. I am even more excited that we are finally realizing our environment is a resource too that should not be free to plunder.

One more thing. The way I head about this was from an email from Human Events from Newt Gingrich. They are much more worried about the economic costs of the plan. That is understandable but destroying our environment for free has gone on long enough. The environment should not be a free resource. There should be a cost associated with polluting it and I for one don't mind that price being built into the energy and products I consume.